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May 23, 2019

When an investment manager sends a prospective investor the subscription package for one of its funds, the documents almost always contain a so-called “non-reliance” clause requiring the investor to expressly disclaim reliance on any representation or statement not contained in the fund’s governing documents and private placement memorandum. Those clauses are intended to protect the manager from potential liability arising from, among other things, statements made in meetings, teasers or pitch books concerning the merits of an investment in the fund. Their enforceability is nuanced, however, particularly under New York or Delaware law – commonly chosen to govern fund documents and disputes. In a guest article, Pryor Cashman partner Jonathan Shepard, along with counsel Eric Dowell and associate Lauren Cooperman, discuss how non-reliance clauses are treated by New York courts, including in a recent instructive decision issued in the Southern District of New York; provide practical guidance for asset managers and their legal advisors on crafting appropriate non-reliance clauses; examine how managers can include additional protections in their fund documents to protect against investor misrepresentation claims; and review how the laws of New York and Delaware are both well-developed and more favorable to managers than those found in other states, most notably California. See “Contractual Provisions That Matter in Litigation Between a Fund Manager and an Investor” (Oct. 2, 2014). For insight from another Pryor Cashman attorney, see “How Fund Managers Can Mitigate the Impact of Litigation on Their Transactions and Relationships” (Apr. 4, 2019).
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A recent J.P. Morgan Capital Advisory Group survey asked more than 200 institutional investors about their perspectives on several hedge fund investment issues. This two-part series summarizes the findings in the survey report, and this second article explores the use of non-traditional alternative investment vehicles, along with investment and operational due diligence. The first article detailed drivers of hedge fund allocations; industry concerns; fee and liquidity terms; allocation sizes and preferences; and performance expectations. For coverage of another recent survey, see our two-part analysis of the ACA 2018 compliance survey: “SEC Exam Experience and Insider Trading Controls” (Dec. 13, 2018); and “Fees, Expenses and Custody” (Dec. 20, 2018).
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Gregg Buksbaum has joined the Washington, D.C., office of Morgan Lewis as a partner in its investment management practice group. Buksbaum primarily represents fund sponsors and institutional investors in the formation of, and investment in, various types of private investment funds, including private equity, hedge, venture capital, real estate, infrastructure, mezzanine, credit, distressed debt and special opportunity funds, as well as funds of funds. For insight from another Morgan Lewis partner, see “CFTC Proposes Amendments to Regulations to Codify Existing Relief for CPOs and CTAs” (Nov. 15, 2018).
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Please join the Hedge Fund Law Report on Thursday, May 30, 2019, at 11:00 a.m. EDT, for a complimentary webinar discussing the key components of a robust anti-money laundering program. To register for the webinar, click here.